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V.F. Corp (VFC) Stock Up on Q1 Earnings Beat & Raised View

V.F. CorporationVFC beat earnings and revenue estimates in first-quarter fiscal 2019. Results gained from solid trends at its core brands (Vans and The North Face) and contributions from acquisitions. The company also witnessed strong growth at its international and direct-to-consumer businesses, as well as Active and Work segments. This marked the company's fourth top- and bottom-line beat in the last five quarters.

The company's adjusted earnings per share of 43 cents improved 62% year over year and beat the Zacks Consensus Estimate of 32 cents. Earnings per share included a 4-cent contribution from Williamson-Dickie, Icebreaker and Altra acquisitions. On a constant-dollar basis, adjusted earnings rose 56%.

V.F. Corp generated total revenues, including royalty income, of $2,788.1 million that increased about 23% year over year and surpassed the Zacks Consensus Estimate of $2,662 million. Net sales of $2,765.7 million also advanced 23% from the prior-year quarter, including contributions from the aforementioned acquisitions. Constant-dollar revenues jumped 21%.

Excluding the impact of acquisitions, revenues were up 12%, while constant-dollar revenues grew 10%. The revenue growth is attributed to the continued strength in the company's international and direct-to-customer platforms as well as Active and Work segments.

Backed by the recent acquisitions, divestitures and organizational overhaul, the company has changed its reportable segments, which better reflects and assess its business operations. In first-quarter fiscal 2019, the company reported operating results under four segments - Active, Outdoor, Work and Jeans.

Revenues for the Active segment grew 25% to $1,136.9 million (up 22% on a constant-dollar basis). Excluding acquisitions too, revenues increased 25%. The improvement was driven by a 35% (32% in constant dollars) increase in revenues for the Vans brand.

The Outdoor segment reported revenues of $568.6 million, which improved 6% year over year (up 3% in constant dollars). Revenues for the segment benefited from 8% rise (up 5% in constant dollars) in The North Face brand revenues as well as 6 percentage point revenue growth contribution from acquisitions.

Revenues for the Work segment rose 114%, both on reported and constant-dollar basis, to roughly $442.6 million. Excluding acquisitions, revenues were up 8%.

Jeans segment reported revenues of $603.8 million, an increase of 28%, both on reported and constant-dollar basis. Excluding acquisitions, revenues for the segment grew 3%.

Other revenues rose 28% to $36.2 million on both reported and constant-dollar basis.

Financial Details

V.F. Corp ended the fiscal first quarter with cash and cash equivalents of $467.9 million, long-term debt of $2,156.6 million and shareholders' equity of $3,726.4 million. The company generated cash from operating activities of $277.1 million.

Concurrently, the company declared a quarterly dividend of 46 cents per share, which is payable on Sep 20, to shareholders of record as of Sep 10. As of the quarter-end, the company had $4 billion remaining under its share repurchase authorization.

Outlook

Following the strong fiscal first quarter, the company raised its earnings and sales view for fiscal 2019. V.F. Corp now expects revenues of $13.6-$13.7 billion, an increase of 10-11%. Earlier, the company anticipated revenues of $13.45-$13.55 billion, up 9-10%. The revised guidance includes a negative impact of more than $150 million from foreign currency.

On a segmental basis, the company expects revenue growth of 6-8% for Outdoor, 13-14% for Active, more than 35% for Work and nearly flat revenues for Jeans. The company now anticipates International business to report revenue growth of about 12-13% compared with the previous guidance of growth of 13-15%. Revenues for the direct-to-consumer business are expected to increase 11-13% versus the previous growth expectation of 8-10%. The company now estimates digital revenue growth of more than 30% compared with the previous guidance of more than 25% growth.

Within International business, the company expects revenue growth of 12-13% (compared with prior estimate of growth of 13-15%) for Europe, 14-15% growth (up 15-17% previously) for Asia Pacific, and 9-10% growth (up 10-12% previously) for non-US Americas.

Gross margin is still anticipated to be about 51% while operating margin is now expected to expand 70 bps to 13.4% (versus prior guidance of 50 bps increase to 13.2%). The company envisions adjusted earnings per share of $3.52-$3.57, representing growth of 12-14% year over year. Earlier, the company projected adjusted earnings per share of $3.48-$3.53, up 11-13%. The revised earnings per share guidance include 6 cents negative impact from foreign currency.

Further, the company now expects cash flow from operating activities to be more than $1.7 billion in fiscal 2019 versus the previous guidance of more than $1.6 million. Capital expenditure is estimated to be $275 million.

lululemon, with long-term EPS growth rate of 14.3%, has surged 32.2% in the last three months.

G-III Apparel has long-term EPS growth rate of 15%. Moreover, the stock has returned 35% in the last three months.

Under Armour has witnessed 32.1% growth in the last three months. The company has long-term EPS growth rate of 20.7%.

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